It's not that simple - the problem is that those institutions are market makers. They are a tiny portion of the market, but a huge driving force in setting and manipulating prices, because their properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives that you don't normally want operating in the arena of housing.

The things that they do have massively outsized downstream impact contrasted against their relatively tiny overall participation in the market, and they can afford to behave in ways that manipulate the behavior of the majority.

If you can decouple them from the housing markets, you also decouple the interests of the donor class, and you allow for policy that doesn't maximize the cost of real estate over the interests of the majority of the population.

> They are a tiny portion of the market, but a huge driving force in setting and manipulating prices, because their properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives that you don't normally want operating in the arena of housing.

Raising prices when you only have a tiny portion of the market does not work. People won't buy them when there's another house for less.

It's not just raising prices - it's holding prices steady at some point without the concurrent pressure to sell, for example, or manipulating other markets in order to raise or lower prices in an area, or using other mechanics to manipulate pricing, across the entire market, depending on the intended actions. If they intend to purchase properties, it benefits them to depress pricing in the area, if they intend to rent, they can afford to impose artificial scarcity until they force renters to meet their rates, and so on.

Normal landlords don't have effectively infinite money with no forces bearing prices down, nor do they have the capabilities to influence markets. Even tiny percentage shifts can result in significant fluctuations in the prices consumers see. It's a very nuanced and complex system in which these institutional investors have very outsized influence.

You're telling a just-so story, and you can tell because there isn't a simple schematic 1-2-3 story you can make from this about how these people exert control over home prices. Words mean things; wielding scarcity requires you to control enough inventory to manipulate scarcity, and REITs and corporate buyers empirically don't.

I get why people like telling stories like this: it suggests there's a single boogeyman that can be dispelled to solve the affordability problem without painstakingly goring people's oxes state-by-state and municipality-by-municipality. But it's a fantasy.

If you can tell this story in simple step-by-step form, you will. I think you could tell a story about how a large corporate buyer clears out all the marginal buyers for some thin market like an individual subdivision or tranche of new construction housing in the Sun Belt. But I don't think you can tell a realistic story for them being "a huge driving force in setting and manipulating prices" across the whole market. I look forward to seeing your attempt, though.

you’re treating narrative completeness as a prerequisite for legitimacy. that makes any systemic issue unfalsifiable unless someone can account for every market, municipality, and incentive simultaneously.

this is an impossible burden of proof. requiring a perfectly schematic, end-to-end causal story before acknowledging harm is a convenient way to dismiss any structural concern.

pointing out that housing markets are complex doesn’t invalidate localized, repeatable effects or concentrated power. that just raises the bar of explanation until lived outcomes are dismissed as “just-so stories”, which matches the tone of your condescension.

I'm treating narrative coherence as a requirement, not completeness.

If narrative coherence is your expectation the only satisfactory resolution is not dig into and normalize the contractual minutiae of the legacy finance system but flush the finance industry and the politically coddled mess it created.

There is no narrative coherence to be found demanding the living honor social debts, contracts of history; yes children believe these successes you never witnessed happened! That surely cannot be used for ill gains.

This smells more like self selection bias. You have been successful and thus prefer care be taken tidying up systemic issues created by our ledger.

Am a Thomas Jefferson fan when it comes to generational churn; the only constant political rule should be to rewrite things every couple decades or the living end up ruled by fiat decree of the dead.

These are words. "normalize the contractual minutiae of the legacy finance system"? Is there a forum where that persuades?

It's what you appear to be doing. I don't really understand what your issue is with that specifically

im not even disagreeing with you, but i hate that hn seems to have this penchant to point out that unreasonable assertions may still be true despite being ludicrous. can facts emerge from a hypocrite? yes of course, but prices are not affected by buying and holding a tiny supply, so given that reasonable axiom, it is reasonable to demand more comprehensive evidence.

> but i hate that hn seems to have this penchant to point out that unreasonable assertions may still be true despite being ludicrous

Topics like this are hard on HN because a lot of commenters hold a deep, passionate hatred of something: Wall Street, Big Tech, OSes they don't use, even the concept of private automobile ownership. Once they descend upon a thread they're not interested in facts, they just want to tell stories that support their villain narratives. When it starts to get illogical they don't want to back down because doing so feels like an attack on their deep-seated beliefs.

There are some completely illogical economic theories being pushed all through this comment section. It's kind of fascinating to see how bad some of them are. Someone tried to argue with me that cars could be produced for a couple thousand dollars if not for all the regulatory overhead we impose on them in the US. It's almost hard to fathom how someone could believe that without stopping for a moment to wonder why no other country is building these $2000 full featured automobiles without these supposed regulations that increase the price by an order of magnitude.

The tata nano is an example of a low-featured car that sold in India for the equivalent of $2500 in 2008 dollars. You can make a car for pretty cheap if you strip down a lot of the hardware. I think one of the reasons new cars are designed/priced the way they are in the US is that the more frugal buyers always end up buying a used car anyway, so the manufacturers don't target the low end of the market.

I agree with your broader point though.

I checked the Wikipedia page. It said there was a $2000 promotional price at launch but only a few people got it.

The real price in 2017 was $3400, which is $4500 in today's dollars.

The safety ratings and crash test results were also dire.

I don’t think it’s an unreasonable assertion in the first place. Just because they are holding a small portion of all houses doesn’t meant they can’t have a huge effect. The primary reason being that the portion of houses on sale is small as well. Another reason being they are huge institutions with tons of money, and thus can hold houses longer, buy houses are higher prices, influence related markets, etc.

> Just because they are holding a small portion of all houses doesn’t meant they can’t have a huge effect.

There's no reason to believe that someone owning a tiny portion of the houses is setting the market price.

> they are huge institutions with tons of money, and thus can hold houses longer, buy houses are higher prices, influence related markets, etc.

No huge institution is willing to lose enormous sums of money waiting for vacant overpriced houses to sell.

I've lived in many houses. One was in a development, and I wanted to sell it. There were several houses in it that were vacant and for sale with no offers in the previous year. I sold mine in 3 weeks. It was simple - I priced it properly, and I didn't have to pay another year of taxes, insurance, repairs, maintenance, and worry, only to have to lower the price anyway to get rid of it. A couple of the other homeowners were angry with me about that, but that was their problem.

There is reason to believe that someone owning a tiny portion of the houses is setting the market price because that tiny portion is a significant portion of the houses on sale.

Before we even reach the question of how true that is, there isn't evidence that any firm holds a significant portion of the "houses on sale". A starting point here would be the fact that corporate investors buy houses and hold on to them, and thus definitionally don't hold any of the house on sale, but whatever, either way, just flesh the story out instead of handwaving it.

if we start with reasonable but definitely vague numbers that suggest 2M houses are for sale and institutional investors own 500k of the total stock, it suggests this is NOT true; it's unlikely they own all their houses in the same geo market and they're all for sale at the same time. This doesn't mesh with a business strategy (diversification) or the typical model (they rent houses; they don't flip them).

Doesn’t rent have a constant influence on house prices? Along with the data science based rent prices they demand, that implies a constant upward influence on rent and consequently house prices.

Also these institutions would be buying houses in high demand areas.

> It was simple - I priced it properly, and I didn't have to pay another year of taxes, insurance, repairs, maintenance, and worry, only to have to lower the price anyway to get rid of it. A couple of the other homeowners were angry with me about that, but that was their problem.

I think you just explained partly the reason behind why a small number of owners can drive the prices up. But these are usually private owners. Whenever I see bank sales, they're more like flash sale and done.

Those who can afford to sit on the property trying to obtain a higher price will do it. Other owners will look at that and try to keep the price high with the illusory hope that they can also make that much money. Individual owners can suffer from FOMO and are influenced by success stories, so ask a high price hoping to capture as much of the value as possible.

I saw it in action when I bought my house. The seller saw his neighbor selling the house a year earlier for [princely sum] so he jumped to put his house on the market for [princely sum +20%]. The whole neighborhood was following the same playbook, looking at who sold and raising the bar. After a year with that house on the market I became interested and in a 6 month process I ended up buying the house for [princely sum -20%].

None of the neighbors know how much he got, only know how much he asked. A similar house 50m away is still up for sale for even higher price than than the listed price for mine. They can afford to sit on it for a while because the extra money they hope for covers the taxes and upkeep tenfold or more.

"None of the neighbors know how much he got, only know how much he asked. A similar house 50m away is still up for sale for even higher price than than the listed price for mine. They can afford to sit on it for a while because the extra money they hope for covers the taxes and upkeep tenfold or more."

At least where I live, real estate sales are public and you can easily find the sale price at the county assessor's website.

You can go on sites like Zillow and see what homes sold for. It doesn’t even require navigating a potentially obscure county web site.

> Those who can afford to sit on the property trying to obtain a higher price will do it

I could afford to sit on it, but I try not to be stupid with investments.

You're either generalizing or just making a mistake stating so definitively that sitting on an asset means being stupid with investments. You know your house and situation but that's far from representative. Sitting on it might turn out to be the stupidest or the smartest decision you can make. If you take the hard stance that it can only mean one thing, you're just being stupid with investments in all the "other" cases.

I am surrounded by people who sat on houses for a decade only to triple their money after inflation adjustment when they sold. We're talking 7 figure profits. Trying to sound smarter than everyone else sometimes backfires.

this is not true, this is the basis for housing speculation. Holding vacant overpriced houses until they sell. Its not a loss until you close the sale.

Of course it is. Real estate incurs significant carry costs.

this doesn't make any sense; you're tying up significant resources and losing out an the alternatives. Nobody evaluates investment returns in isolation.

the numbers I have seen suggest that institutional investors own about 500k of the ~100M residential properties in the US. Small investors probably own about 15M in total. Roughly 2M units are for sale, so even if every single institution-owned unit was for sale they wouldn't be able to exert much influence. The fact that this is a big, complex and widely distributed market IS the reason they can't distort it like they do with specific industries in a given geography.

Ownership share is a stock. Prices get set by flow - transactions. Housing is a thin market; maybe 5-6% of homes change hands in a given year. Price discovery happens at that transaction layer.

Institutional investors own ~3% of single-family rentals nationally. But per CoreLogic they're 29% of purchases in the starter home tier. That's the market where we first-time buyers actually compete.

In some metros it's more concentrated.

Atlanta: ~30% of single-family rentals corporate-owned.

Charlotte neighborhoods in 2022: 50%!!! of sales to institutional buyers.

So for your 1-2-3... maybe something like?

1. Institutional buyers concentrate in starter homes where they're 29% of transactions, not 3% of stock

2. Target metros/neighborhoods go higher still

3. Real estate uses comps-based pricing - their winning bids propagate to surrounding valuations

The mechanism isn't inventory control, it's just a buyer with a different utility function (rental yield vs owner-occupancy) systematically outbidding price-sensitive first-time buyers. In a thick market that gets arbitraged away. In a thin market with sparse comps, each transaction is a price-setting event.

The St. Louis Fed found institutional presence specifically increases price-to-income ratios in the bottom tier.

If you're evil corporate Landlordman You don't need to affect the whole market. You just need to cut off the bottom rung of the ladder.

Is this Trump move the right one? No frickin idea! But I do think we need to reckon with what's actually happening to first-time homebuyers. I bought a place in Englewood Co last year and ... it was pretty rough.

Whoah, hold up, your (3) is doing a lot more work than you think it is. Comps matter but they don't literally break the market:

* They impact listing prices but not necessarily clearing prices.

* They assume all the sellers, who are not corporate investors, can mechanically anchor off those inflated comps, without factoring in buyer budgets and carrying costs.

Real estate is slower than most financial products, but it's still an actual market. You can't just buy a tiny fraction of the inventory at an inflated price and assume the whole rest of the market will follow you.

Reread my #3 in the context of "rental yield vs owner-occupancy."

I'm not saying comps magically anchor prices. I'm saying institutional buyers ARE the clearing prices, because they are anchored to "how much can I rent this out for" whereas first-time homebuyers are anchored to "how much can my mortgage cover?" which are different questions.

29% of transactions, not 3% of stock.

Those become the comps. There's less of a gap for "but buyers won't pay that" because the institutions *are the buyers. The call is coming from inside the housing market.

I'd actually just say that comps magically anchor prices in the constrained market we've been experiencing. As a person who was looking to buy a few times over the last few years, comps strongly affect appraisals which affects whether a company will issue a loan for the house (appraisers actually send you the houses they based their appraisal on). Plus realtors base their understanding of the market on comps when they try to help you form your offer. And of course sellers will look at comps when deciding what to ask for and whether to accept your offer.

Now this only really works in constrained markets, but intrinsically there's always a time constraints in buying (our lifetime of course, but also life events and lease renewals and er ). There's of course also selection constraints because of the aforementioned time constraints, and location, and whether new construction in happening within those.

Saying "they impact listing prices but not necessarily clearing prices." might be logically consistent, but is disconnected from the reality of the housing market.

All of you are assuming that buyers are rational, as if pump and dump in crypto was somehow isolated to the online world and not possible in the housing market. You don't have to have complete market capture to make that happen. All you need is to have enough volume that it causes potential buyers and sellers to play along.

If you're big enough, you can cause prices to ripple, get others to lose rationality and buy in on the ascent as you cash out and leave everyone else holding the bag for the crash.

Respectfully, I think 'individuals' is doing a lot more work in GP's 'But most of the "investors" buying up property are individuals purchasing investment properties.'

The average 21+ US resident may own 2+ properties but I'd be surprised if the median equivalent owns 1. It kinda hides the equivalent of the top x% of individuals owns y% of the stock market where y is unreasonably disproportionate to most.

I'll add one more data point to the thread;

The timing and pricing of investor selling is different to residents selling.

Residents sell (mostly) for reasons other than profit. They might be moving up, or moving away, or whatever. There's some pressure to "get it done" so they can move on. They can't really afford to "time" the market.

For investors there's much more "buy in the down, sell in the up". Except that it's been going up for a while, so there's no motivation to sell at all. It would be uncommon for them to accept a loss. Even unoccupied it's (mostly) better to hold rather than sell at a loss.

As mentioned elsewhere, overall market penetration by investors differs wildly by market, and segment. So 3% overall might sound low, but 20% of a dwelling type in a specific market is plenty to alter market forces.

I say this as someone who has owned property as an individual, and also worked in a business that invested in property.

> there's no motivation to sell at all

There's a huge motivation - the time value of money. And all the costs of having the house sit there not earning money.

An $800,000 house costs you $150/day in lost income.

Returns are better on the lower end of the market, and demand for rent there is higher. Which is why most residential investment is at the bottom end, not the top end.

In most markets I'm guessing an 800k house is at the higher end of the market.

That aside, housing portfolios always plan for a certain amount of unoccupied space. It's built into the model. (That's partly why small investors who own 1 or 2 properties get hit harder by this.)

Equally, even if the house is empty, there's usually some capital gain going on.

Investing in property is a long-term investment. The cost of buying, or selling is very high. So it's about getting quality units, in the right market space, and then leveraging that for a decade or more.

Yes there are lemons. And yes they'll get sold, perhaps at a loss. But being unoccupied for a bit doesn't make it a lemon, and being unoccupied won't necessarily trigger a sale.

Institutional investors are much more experienced and thus also a lot more likely to not buy lemons in the first place. Most "mom and dad with a second property" investors either inherited a place, kept an earlier property they lived in, or bought another property in their own neighborhood. They're typically gonna make some mistakes along the way.

>but it's still an actual market

It depends on the swing of the market if it's a buyers or sellers market.

In the past there was far more spread in housing prices. These days real estate agents tend to follow a few market making sources for setting those prices, along with personal home sellers looking at 'internet prices'.

>inventory at an inflated price and assume the whole rest of the market will follow you.

When you target particular areas you absolutely can.

> Institutional investors own ~3% of single-family rentals nationally. But per CoreLogic they're 29% of purchases in the starter home tier.

Not true. That 29% is “investors”. Only one fifth of those transactions are from “institutional investors”. It’s mostly evil non-institutional investors, who also own ~97% of single-family rentals.

Exactly, everyone is for affordability but no one wants their primary residency to be worth 50% less in 5 years.

Housing affordability is inherently unpopular with voters.

If it cut my taxes 50%, I would, as I have no intention of selling it.

>> You're telling a just-so story, and you can tell because there isn't a simple schematic 1-2-3 story you can make from this about how these people exert control over home prices.

We don't need to explain how they do it. We KNOW private equity is expecting to make profit from their investment in residential real estate. That profit ultimately comes from people in houses, making them less affordable.

I don't mean to convey that it's intentional. There's no conspiracy of cigar smoking financiers in tuxedos smoking cigars in dark rooms. It's just like the Carlin observation - there doesn't have to be a big conspiracy. They just know what's good for them.

They behave accordingly. The do things that they can, and because those things are relatively new, it's a type of information asymmetry and policy / good intentions / competence arbitrage that we haven't had to cope with before.

You might end up banning certain types of institutional participation in the housing market, because there's no way to protect against the negative consequences that doesn't have even worse consequences for either the participants or the population at large.

It'll probably have to be arbitrary, and the cost will be a bunch of firms no longer get the opportunity to make a bunch of money by leveraging their resources in that way.

And we see the influence and impact constantly, with outlandish asking prices being immediately met by institutions that have decided they want a particular property in a particular region. Or house prices being set to an outlandish level with no reduction in price over months and months on the market, because they can afford to sit and wait for the market to change. And if they can afford to do that, then all of a sudden they've got an incentive to drive prices up in that region, because local and state governments, banks, and realtors tend to use the same basic rubric to evaluate price. If a lower valued area sees home prices go up, properties in the higher valued area will be raised accordingly. There's no secret quant voodoo, it's just using a level of liquidity and staying power not accessible to non-institutional homeowners.

Supply and demand normally influence pricing feedback at much more granular levels which benefits individuals, and our policy and regulation and evaluation models are largely built around those assumptions. Without the negative feedback driving prices down, bad things happen for consumers, good things happen for those who already have lots of money and property.

I'm not talking about whether it's intentional. I'm talking about whether it's possible. If corporate investors could control the price of housing, I believe they would.

I can buy a house tomorrow and hold it vacant off the market at a listing price 3x its value. I will have zero impact on the housing market. You may be conflating the listing price of an asset with the clearing price of that same asset. You can, obviously, build up inventory to manipulate prices. To do that, you have to be able to generate scarcity, which is exactly what corporate investors aren't doing.

You've just given me 6 more paragraphs about the control you think they have, and you still haven't told a simple 1-2-3 story about how they're using a microscopic footprint in the total housing market to distort prices.

You have to do better than "supply and demand normally influence pricing feedback at much more granular levels". In the context of your original claim, of them being "a huge driving force in setting and manipulating prices", you need to explain how that would actually work, and not rely on handwaving.

I think your case on this debate is more sound however

> To do that, you have to be able to generate scarcity, which is exactly what corporate investors aren't doing.

But they did. When inventory was low and then zero percent rates where available, they bought everything they could and drove prices up and created an appreciation bubble. I don’t think they have some other dark patterns for manipulating the market but they had access to a lot of basically free cash. Inventory of houses for sale is a tiny portion of the total market and they could and did contribute to driving prices up. But so did everyone that had the opportunity and inclination to do so, and why not when money is free leverage the shit out of it in an asset class that will generally appreciate without much risk.

I don’t know what ever came of that now that rates have increased. Are they still holding those homes? Did they sell them after driving prices up? (But not fast enough to make prices go down again obviously). Are they landlords now? Etc.

The market is still reeling from that economic situation that created this. Prices may eventually float down but no seller is eager for that so it’s a bit sticky.

My case is built on the empirics that corporate investors are a very small fraction of the available houses for sale. Notice the stories you're reading about places where corporations are disruptive: they're in thin markets. A corporate investors can totally (if temporarily) fuck up the prices in a single subdivision. But unless they can do that across a broader market, they don't have meaningful pricing control.

My claim would be that in any any of the top 10 markets by transaction volume (just to pick a handy metric out of the sky; you could choose others), corporate investors are literally a nonfactor.

They don’t have to buy to fuck up the market. They just have to bid. If there’s low inventory, people that actually need to buy a home are forced to beat/match the bidding.

They can also target just specific areas of specific major metros and there are ripples throughout the entire market.

The housing “market” does work the same as the stock or commodity markets. People aren’t buying an intangible share. They’re buying this specific and unique house and if they’re told “we just got a cash offer for $50k over ask”, they may be tempted to beat it. That doesn’t happen when people buy AAPL. The shares are fungible.

There’s only empirical evidence of their buying activity. We’ll never know how many deals they bid the price up on but didn’t buy. This auction like quality is evident in any market like this; watch Storage Wars and one disinterested buyer will bid up the price just to fuck with his competing bidders.

Respectfully, I think this is just made up. "They just have to bid" to manipulate prices in the real estate market: I don't think you can show that's a thing. Please by all means make the attempt.

As I said, there’s no data on this. Unaccepted offers don’t get tracked anywhere and don’t show up in anyone’s financial records. However, have you ever participated in a “multiple offer, best and final” type RE market? There’s plenty of opportunities for what I explained in market conditions we saw in recent past in many parts of US.

So you're saying there's no evidence to support your claim. That's what I just said.

I said it in the comment you replied to asking for evidence

Fair enough!

> They just have to bid.

You can't "just bid". A bid is a contract. If you back out, you'll lose your earnest money.

No, making an offer is a bid. It’s cost nothing to make an offer. Multiple offer situations were the norm for a few years in much of the US. Many listing agents will post on the listing “multiple offers, best and final due by X date”. Nobody knows if that’s true or has spent any money yet by making those offers (earnest is put down only once an offer is accepted). This is US I don’t know if you’re from elsewhere or just misinformed but you’re wrong.

There’s a lot going on between making an offer and losing earnest money.

I’m selling a house right now that’s in bad shape so getting lowball offers. They don’t even submit an offer, they text me or call me and tell me what price they would offer. They don’t want to do the paperwork for something I’m just going to ignore. Yet, if it turns into 2 or more people floating numbers I like I will tell them to write it up then I will tell them there’s another offer and try to get them to go higher. All that is before I accept there offer and earnest money is put down after that. So the bidding war is over by that time.

Even if earnest money did work how you describe, it would tie up a few thousand dollars per property for a few days max then be returned and redeployed on another property. These companies have deep enough pockets to fund that. There earnest money only ever enters the picture of their offer is accepted.

> When inventory was low and then zero percent rates where available, they bought everything they could and drove prices up and created an appreciation bubble.

Where did this occur? Is this substantiated?

I’m speaking mostly from memory of it when it occurred in the US , was Covid era housing market 2020-2021 is when prices surged the most and was when they had a marked increase in their activity. Again, it seems small overall but they were the cash offer 50k over ask that everyone trying to buy a house was competing with. It doesn’t take much to move a market this size as it’s relatively low inventory and volume. It’s like how a whale could transact move bitcoin price so easily because so much of it is illiquid. It’s gotten more difficult as the price is much higher, but still possible. Also, prices tend to correct faster in that market than they would in housing market.

Googles AI overview of my search for “ covid era corporate home purchases”, also plenty of substantiating references in those search results;

> Corporate home purchases surged during the COVID-19 pandemic, driven by factors like low mortgage rates and increased demand for single-family homes. While this trend has plateaued since the peak, investor activity remains above pre-pandemic levels and has sparked significant public debate and legislative action.

A tidbit from an article indicates they doubled their prior investment activity. Probably more than double because investors bought homes increased and their share of that metric doubled.

> Prior to the pandemic, mega investors averaged about 7% of overall investor purchases and their share increased to 14% during the pandemic — it has now slowed

What article? Which markets were impacted?

I do not think it's unreasonable to request a single example, statistic, or attributable fact.

You don’t have to agree with anything I said but I’m not here to be your research assistant, I gave you my thoughts and some paths to references. It’s evident by this debate nobody is certain on anything and were hypothesizing. If you want a mathematical proof before you can grasp concept of gravity, or form any opinion of your own, I can’t help you.

> they had access to a lot of basically free cash

What? Cash is never ever free. If it's your Scrooge McDuck cash vault, you're losing money by not investing it. If you borrow it, you're paying interest on it.

https://romanroyce.com/wp-content/uploads/2022/02/ScroogeMcD...

Mortgage rates were below inflation. That’s same as free money and why so many investors bought as much as they could leverage

> because they can afford to sit and wait for the market to change

Some people do that, but they aren't good businessmen. Vacant houses lose money at a prodigious rate.

Not anymore than an occupied rental house with a bad tenant.

Many vacant homes in the SF bay have been that way for years and have appreciated tremendously.

Mant would perfectly prefer buying poorly maintained boomer stock, holding for roughly forever (in ideal markets, like the distorted California/Prop13) and leveraging it like a brick of gold. Actually having someone live in it doesn’t outweigh the risk of managing pesky tenants esp. when the houses are appreciating 500k over 5 years.

How do I distinguish the world where institutional investors are meaningfully contributing to high housing prices and the world where they aren’t? Is there some metric you’ve seen that substantiates the mechanism? For example, are they only 1% of holders but 50% of trading volume or something?

Because if I saw a house 15% below market where I live, I would buy it (to live in). I don’t imagine I’m the only one. Institutional investors can’t stop me from doing that if it’s offered - can they stop the seller from offering that?

You could be 50% of trading volume just by trading a small number of properties back and forth constantly! That doesn't mean anything.

I don't get how that hasn't had an effect on prices.

There's not enough houses on the market (zoning, and people want to keep their low-rate mortgages), there's people worried they can't afford houses (prices inflated faster than wages, rates went up), and a large amount of housing transactions (someone quoted 29% of starter homes) are being paid for by institutional investors (who can pay cash).

Wouldn't these institutional investors buying houses be "marginal consumers", kind of like the marginal producers who set the price of inelastic commodities such as oil? Seems like 29% of transactions is even more than marginal.

I assume that sellers would need to come down in price to what non-institutional buyers could afford if institutional buyers were removed from the equation.

As an aside, I'd rather see supply increased, but maybe demographics over the next decade or two will fix that problem anyways.

Manipulating markets by controlling liquidity while not holding a large percentage of the overall stock is a thing. The fact that you could juice trading volume by doing something stupid for no reason doesn’t make it a useless statistic for evaluating what is going on in a market (unless you’re alleging that institutional investors would do this, and I can’t see the motive). This isn’t some shitcoin whose creators are faking trading volume to appear on the leaderboards - it’s houses with deeds.

To be clear, I don’t think institutional real state investment is a substantial part of the reason housing prices are so high. I’m just trying to push whatever argument they were thinking of toward something quantifiable.

Just wanted to say these are great comments – you are good at explaining complex economic concepts clearly.

That has not very much to do with money though. There are many ways to allocate scarce resources, such as rationing. Even if money is used, the mere fact of scarcity doesn't define the price of something. Silver is also finite, but it still costs $2.50 a gram and not $25000 a gram. Land was always finite but was still much cheaper in the past.

The main contributor to the price here is financialization. The more money the average buyer can raise for one of the scarce things, the more they cost. Nobody wins from this except the banks, so perhaps it should be more regulated.

Building regulations are also a problem. Legalize whatever you feel is the minimum safety standard of homeless encampment or slum, and watch house prices crash overnight, since prices are set at the margins and a lot of people (including me) would be happy to find a way to work with simple concrete box if it was cheap and secure, but it's not legal to build those.

You're getting at the problem but you still don't understand the essence. Land is special because you can't make more of it. Even the Netherlands don't count since what they did is considered an 'improvement'.

Yes, you still need to solve the problem with 'money', or more accurately a tax. That tax is based on the assessed land value using market knowledge, but it would ideally be set to drive down the price of land to zero. However since we don't live in a world of spherical cow, tax would be set below that ideal to avoid land abandonment.

This is not even new by the way. The crisis we face is the same as in the 19th century when Land Value Tax and Georgism was proposed.

I like Georgism just fine but you don't need it to solve this problem; LVTs are just a prompt align people's incentives with upzoning and increased supply. Instead of doing that (it's not going to happen), you can just outlaw the municipal measures that are used to restrict supply.

Okay, but institutional investors didn’t create that fact of reality, and I don’t think they’re responsible for the fact that people want to live in or near cities either (instead of the middle of nowhere, which remains dirt cheap). If they’re not holding significant stock, what effect are they having on scarcity?

> and you cannot make more of it

The Netherlands and Tokyo beg to differ.

Yes, you can make more. Make multi-level buildings.

You overly complicate the situation by targeting one type of actors. If you look at comment around this story, people propose complicated mechanism to hack at the problem instead of looking at the root causes.

It's just land ownership isn't being taxed properly, no matter who owns the land. We homeowners get a free lunch from economic growth and price appreciation of real estate while penalizing capital investment.

The solution is simple if not necessarily easy to implement. Tax land and at a high enough rate, and exclude building and improvements. We'll reap bigger benefits if we reduce taxes on income and capital and eventually phase it out.

Don't tax land, because that will force homeowners to prematurely sell and move into cardboard boxes on the street. Tax gains when selling at a higher rate.

Carlin was a comedian, not a finance person.

Having deep pockets simply means that you lose a lot more money when following money-losing strategies.

Most of these schemes are hare-brained because they do not take into account the time value of money nor the costs of having vacant investments that are not generating revenue.

The way businesses make money is by buying an asset and then immediately putting that asset to work generating revenue.

About 2 miles from my house, a housing development recently went up.

No homes for sale. Rent only.

Stuff like that is becoming a big problem.

I don't think you can say that universally. Some people prefer to rent instead of own. Some people would like to own, but would probably still only be afford to rent even if home prices were more affordable.

Sure, you can absolutely make the argument that for some specific region there are too many rental properties and not enough owner-occupied properties, by looking at the supply, demand, and pricing for each type in that region.

But you absolutely can't say that as a general statement. There is demand for both sorts of housing.

Why? Why should I care what the balance of rental and owner-occupied is? Owned is not strictly better than rented!

At scale, it limits the supply of available homes to buy which increases the prices.

When we constantly read stories about people not being able to afford homes today, it’s all driven by pure supply and demand. When a firehose of money gets aimed at any aspect of the economy everything gets more expensive.

This is from institutional investors. Sometimes it’s government when we are talking about the price of education or healthcare for example.

None of this is happening "at scale", but either way, you're talking about the price of deeds on houses, and affordable housing isn't about home ownership; in fact, the urge people have to drive this issue towards "starter homes" is a big part of the problem, because the highest-opportunity areas have strictly limited carrying capacity for single-family homes in the first place, and what we desperately need to do is upzone and diversify the housing stock.

It’s literally a new development. Someone went out and turned some raw land into rental houses. If they had left it as raw land, there also would have been no change in supply of houses to buy.

Instead, now they’ve created a slight reduction in demand for houses to buy by offering a housing alternative that didn’t exist before.

> it limits the supply of available homes to buy

It also lowers the demand (it increases the supply of an alternative).

Isn’t manipulation of zoning an example of why it’s important and how even with a small share they can have an outsized influence on the market? Also I seriously doubt the return to work directives are driven by anything more then the projected drop in property values.

No. I actually don't give a shit whether corporations can buy single-family houses, by which I mean, I don't care if that's banned. My problem is that high-opportunity high-value residential areas are deeply resistant to upzoning and are actively using this "corporate investor" narrative as a reason why they should wait. Corporate investors are not why the inner ring suburbs with the good schools in major metros are expensive; zoning is. This is literally a distraction from affordability work.

There can be more than one problem at once. Two different solutions can be tried at the same time.

This doesn't acknowledge anything I just wrote.

You said blaming corp buyers is a distraction from NIMBYISM. I'd argue corp buyers are a problem as well as NIMBYISM. Both should get blamed and be addressed.

In fact, it's the opposite: corp buyers are associated with declining rents. I don't care what happens with them either way, they're a second-order factor, but most of what people are saying about this phenomenon is just wrong.

And neither is rented strictly better than owned. You would care if you wanted to own but couldn't.

I agree, in the same way I'd care the other direction if I wanted to rent, which is why I don't understand the concern about inventory shifting to rentals.

In my experience, there are a lot of people who don't consider renters as people that deserve consideration in governmental decision making. So if rental supply becomes available, it doesn't matter, not only because the person doesn't want to rent, but more so because renters are not considered permanent citizens of the local city and therefore they don't matter.

This is a recurring theme k see among both right wing and left wing people when it comes to looking at single family homes.

Yes, it's a real problem. A surprising number of politically-well-connected people in my muni believe that renters don't even pay property tax.

Can you point to any municipality anywhere in the USA (or anywhere else, if you like) that prevents renters from voting, attending public meetings, donating to candidates and otherwise participating in local decision making?

No but that is not what my comment was talking about.

> there are a lot of people who don't consider renters as people that deserve consideration in governmental decision making

How does it matter whether "a lot of people don't consider" something if there are no laws or enforcement actions that make their opinions actually effective in the world?

> no laws or enforcement actions that make their opinions actually effective in the world?

How do you come to that conclusion? The people who show up to local planning meetings are clearly very effective at enacting their opinions in the world, and local planning is the place where a tiny number, perhaps 3-5 people, can drastically change the results for an entire area.

The line I quoted from you concerned people who don't consider that renters should be involved in local decision making. I'm asking you what difference it makes what they consider, when they are not actually able to enact any barriers to participating in local decision making? I mean, sure, they make think that renters should stay out of the planning meetings, but if they do not stop them, what difference does it make what they think? Renters vote too ....

If I understand you correctly, you're saying that because renters can vote, they have equal impact on planning decisions, and therefore a bloc of voters that do not consider renters' needs as being valid for the city is OK. Please correct me if I'm wrong. I have two objections to that.

1) Local planning decisions are not made on the basis of democratic votes, they are political decisions made by a tiny number of people that are highly susceptible to influence. In particular, money and local political power has a huge effect on who gets elected, who is paying attention to what happens, and who benefits. There's very little attention paid to these matters except those with highly conflicted interests, which means that highly conflicted decisions are the most common outcome. Which leads to suboptimal results over longer periods of time, as happens in any system that appears to be democratic but is actually corrupt.

2) Even in democracy, one bloc deciding that another bloc's interests can be ignored and don't matter to the functioning of government is an extremely toxic environment which results in awful outcomes. I view any system where there are second-class citizens as a fundamentally un-American idea and counter to the goals of our nation. Those who wish to exclude an entire economic class from their community are trying to create precisely that sort of second-class citizen.

I agree that political decisions are arrived at by imperfect, corruptible processes, and that these tend to favor those with capital interests (e.g. home ownership) in certain outcomes.

However, I do not think there is any reason to require that all voters respect the interest of all other voters, and any system that is predicated on such respect is doomed to fail in worse ways than the one we have.

Democracy is hard work. Good things don't happen by just casting votes. There are almost always other interests at work that are likely to conflict with your own. You can't wish this away, you have to do the work.

The one thing I will say that I think is actually blatantly corrupt is when planning meetings are held at times or in locations that make it challenging or impossible for the people most likely to be renting to attend. And this really does happen, far too much. In spite of this, I think that focusing on the attitude of the voters who oppose the interests of renters is a mistake, and that one should focus on how to fix the process.

Are you concerned about physical DVD purchases shifting to subscription-based websites?

Not remotely. As someone who came of age in the 1990s, I can say with complete confidence that it has never, ever, in the whole of human history, been easier for ordinary people to access more film content than it is today. If I had to pay every single time I watched a film, as opposed to opting to "buy" (say) Big Night, I'd still take that in preference to going to a fucking video store.

But either way this has nothing at all to do with housing affordability.

My point is that the rent vs own model is taking over every industry and it's never good long-term. If you had to watch the same movie every day, and you knew that fact in advance, and your only option was pay-per-view, wouldn't that suck?

You're doing my job on this thread for me by trying to set rental up as some kind of second-class residency we should be skeptical of. I agree, that's the subtext of this corporate investment stuff: that renters are bad.

> renters are bad

Uh, no, don't equivocate "forced rent" with "renters". That's bad faith.

No, it isn't. This is literally the subtext behind the policy. You see it all over this thread: the idea that converting an owner-occupied unit to a rental, even though it lowers area median rent, is a bad thing. There's no other interpretation. If reading that makes you uncomfortable, recheck your priors on the policy itself!

My wife and I prefer to rent. Greater flexibility. This is not a big problem any more than the fact that Costco replaced stock of Spiceology rubs with Bang Bang Sichuan seasoning.

Example of large buyer in thin market - just as up-thread described.

> it's holding prices steady at some point without the concurrent pressure to sell

Earlier you were arguing that investors were acting as marketmakers and now you say this. Marketmakers make their profit from the difference between buying and selling some asset. They don't want to hold prices, they want turnover. If investors really are acting as marketmakers it's actually a good thing because marketmakers have the effect of adding liquidity to a market.

if they controlled even a notable minority share this might make sense, or the majority of a specific region or type of stock where there are limited alternatives, but I don't see any examples of this. We didn't even see this type of phenomenon in the biggest US crash markets where banks owned entire neighbourhoods; even they were not immune to overall market forces. To suggest PE has anything like infinite money and/or time totally ignores that everyone is subject to opportunity cost. A fund that under performs for any length of time because they're playing some sort of marginal long game won't exist for long.

You just haven't presented any evidence or even a hypothetical where this does or could happen.

This just isn’t true - I sort of wish it where.

> If they intend to purchase properties, it benefits them to depress pricing in the area

Yeah, that’s true of everyone but how would a bank/individual do that? By selling… But if they sell while they’re depressing prices, they lose money!

> Normal landlords don't have effectively infinite money with no forces bearing prices down

Neither do banks. They have quarterly earnings, tax bills, they need to buy more stock, cost of capital etc etc.

> It's a very nuanced and complex system in which these institutional investors have very outsized influence.

Just saying ‘it’s complex’ is trivially true. But, supply and demand isn’t some small factor in that calculation - it’s an iron law that exerts itself at all times.

If a bank wants to ‘manipulate prices’ then, without a monopoly, the only way to do that is to dump or buy. But if you buy up homes to ‘push up prices’ … then you end up with a bunch of homes which you paid more than their current value. Not a great business.

The person who has the real unfair advantage in the US happens to also be the most sympathetic person - the owner occupier.

> which is mostly because it's really expensive to build houses,

Assuming you're referring to the typical high CoL areas, the shortage has very little to do with the expense of building. The zoning laws don't permit sufficient supply in those areas. And that's quite unlikely to change (at least quickly) because anyone pushing such reform would be obliterating the average Joe's net worth.

    > anyone pushing such reform would be obliterating the average Joe's net worth.

This what Obama calls the false choice dichotomy -- "Damned if you do, damned if you don't." In your scenario, if we build more homes, then existing home owners are "obliterated". This is untrue. We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.

That doesn't really make sense. The problem we're trying to solve is that housing is too expensive. If we do things that end up lowering the cost of housing, then the saleable value of "average Joe's" house will also go down. You can't say that newly-built housing will be (for example) 20% less expensive, but existing housing will keep its value; that's just not how the housing market works.

I'm not sure if "obliterated" is the right word to use, but if making housing affordable means a 20% drop in home prices (which is perhaps not even enough in some places), average Joe existing homeowner is going to run into financial trouble once that happens.

> We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.

If that's the case, then all that new housing will also cost more or less exactly the same as the existing housing stock costs, and the problem will not have been solved yet.

How do home owners get into trouble from falling prices if they're just living in their home?

Sure, if they need to move and sell, the price difference might be less favorable to them, but having to weigh cost vs benefit of moving is a fact of life one way or another.

It's a strange expectation to have that home values should act as an investment that can only ever go up.

Letting that expectation influence policy on making space for living available is one of the root causes of this crisis.

My feeling is because we build little in the way of new units of housing most places. All the money being injected into the real estate industry is from the price-debt spiral.

I'm only proposing to build enough units such that house prices rise at the rate of general inflation or slower. In many highly developed, capitalist systems, their housing prices barely budge in a generation when accounting for general inflation. This is done though careful regional planning. This business of "housing as investment" (for normies) is awful and greatly harms renters.

To be honest, just getting to the point where house prices don't rise above inflation, maybe even stay fixed (so inflation eats away at their value), would be a massive accomplishment. The main problem at the moment is prices keep rising above inflation in most places, year after year.

Also known as “housing cannot be both a good long-term investment and simultaneously remain affordable over a long period of time.”

Many people have been sold on the former and will (fairly understandably) act to protect the value of their single largest purchase which often has a large mortgage attached to it.

Many people overlook the effect of 30 years of general inflation on their outstanding mortgage debt. Also, most people's income rises as they age, so the monthly payment becomes proportionally smaller. If you buy around 30-35 (and many in the US, outside of crazy areas, buy much younger), then their income will rise for long periods of their mortgage.

What I'm describing is a systemic dysfunction due to financial incentives.

The "crisis" is specifically the high cost of housing. So if whatever you do doesn't lower the price then by definition you've failed to solve the problem.

It's certainly a dichotomy but I don't see how it's false?

> We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.

It's certainly possible to encounter nonlinear behavior. If some aspect has saturated then we might build quite a bit without seeing any substantial price movement. But eventually prices would start to decline.

> anyone pushing such reform would be obliterating the average Joe's net worth.

Only in a purely illusory sense. Suppose you have all your net worth tied up in a house. If your house magically vanished, you'd have nothing but your job.

The price of houses falls to $500 and you potentially go bankrupt. Then, you buy a house for $500.

You, personally, are now better off than you were before. Some examples:

---

1. You have $200,000 of equity in a $700,000 house. After the price drop, your net worth in dollars has improved by $300,000. Your net worth in "stuff" has risen dramatically; you kept your job, and now you have 100% of a house instead of having 30% of a house.

2. You have $700,000 of equity in a $700,000 house. After the price drop, your net worth in dollars is down by $699,500. Your net worth in stuff is unchanged. Assuming you always need to live in a house, this will never have any negative impact on you. You retain the option to live in the house you have (which leaves your life unchanged), and you also retain the option to sell your house and use the proceeds to buy another house (and this option looks a lot better than it used to; given the crash in prices, you can probably afford a much nicer house).

3. You have $200,000 of equity in a $700,000 house. You also have $15,000 of "equity" (resale value) in a car that you owe no money on and bought for $50,000. After the price crash, you lose your house and your car, and then you buy another house for $500.

Replacing your car will cost you $50,000. You are in a similar position to the guy in example (1), but $50,000 poorer. So now we ask: was it better to be $500,000 in the hole on your house before, or to be $50,000 in the hole on your car now?

---

There isn't a way for the average Joe not to come out ahead. There is a way for someone else to lose out on the price crash: if you had more than one house before, you lost everything on the houses you weren't living in. But that's got nothing to do with the average Joe.

You would still need to pay the bank the full 700k even if it's only worth 300k now. This might mean that you still owe 400k on a 300k asset. In this way you can be underwater while still being a 30% owner.

But that option is obviously worse than declaring bankruptcy, which you can do. You can't be forced into remaining with your underwater house.

It does raise the point though that anyone who borrowed against his house to obtain other assets could be negatively affected by this turn of events.

Also in the case of mass bankruptcy and mortgage failure of the lower middle class I guess there would be risk of bank failure as in 08? That said, I still think the hypothetical illustrates the overall situation quite well.

> It does raise the point though that anyone who borrowed against his house to obtain other assets could be negatively affected by this turn of events.

How?

A drop in the price of houses means it becomes more difficult to exchange houses for non-houses.

If you borrow against your house to obtain something else, and then the price of houses falls, you successfully timed the market. That's all upside for you.

What do you think is the difference between example 3, the guy with a $500,000 mortgage on a $700,000 house, plus a $50,000 car, and example 3', the guy with a $450,000 mortgage and a $50,000 car loan on his house, plus a $50,000 car?

Say I inherit a $700,000 house and, being the kind of guy I am, immediately mortgage it for $500,000. But I stop renting and move in to my new house. Also, I hire a bunch of call girls to live with me in my house. One year later, the price of my house drops to $100,000, and I turn it over to the bank.

I started (the crash) with a $500,000 loan and no way to pay it back other than selling my house. At this point, the faster I realize what's happened and sell my house, the more money I'll be left with. (If I sell immediately, I'll get $200,000!) The longer I postpone selling, the worse off I'll become. (Though since I can live in the house, this trades off against what I would spend on rent.)

I've also spent $500,000 on entertainment and one year's rent. Mostly entertainment. Is this a harm that was dealt to me by the fall in the price of my house?

When the price falls, this forces me to sell the house, locking in a profit of... $500,000. (Which I've already spent.) It could have been $700,000, in theory. This $200k difference in profit vs potential profit can be seen as an effect of the price crash. But that's pretty good for an event that notionally took $600,000 out of the value of my house. Borrowing against the house helped me.

If you want to talk about a negative effect on someone, walk me through the accounting.

    +-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
    |    event    | my equity | my cash | my debt | bank equity | bank cash | bank held debt | hookers |
    +-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
    | baseline    |        0  |      0  |      0  |          0  |        0  |             0  |      0  |
    +-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
    | inherit     |      700k |      0  |      0  |          0  |        0  |             0  |      0  |
    +-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
    | mortgage    |      700k |    500k |   -500k |          0  |     -500k |           500k |      0  |
    +-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
    | party       |      700k |      0  |   -500k |          0  |     -500k |           500k |    500k |
    +-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
    | price crash |      100k |      0  |   -500k |          0  |     -500k |           500k |    500k |
    +-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
    | bankruptcy  |        0  |      0  |      0  |        100k |     -500k |             0  |    500k |
    +-------------+-----------+---------+---------+-------------+-----------+----------------+---------+

At the beginning of this process, I was short $700,000 for a house that I needed but didn't have.

Before the price crash, I had "200k equity"† in that very house, leaving me $500,000 short of a house.

After the price crash, I was deeply underwater on the house. Without bankruptcy, I was still $500,000 short of my house, but only $100,000 short of some other house.

And then, after the bankruptcy, I was $100,000 short of a house.

1. What is the harm that I suffered from the price crash?

2. If the "hookers" column had some other label, would that change the harm that I suffered from the price crash?

† You might note that this is accounted as 700k equity in the table. The table is correct, but that's not how we talk about it. There is probably an error in my earlier comment related to this.

> a $50,000 car loan on his house, plus a $50,000 car?

Well I suppose that guy might come out unscathed since many US states protect your primary vehicle in a bankruptcy. But to an approximation declaring bankruptcy involves losing all of your remaining assets. So in that scenario the borrower is on the hook for the cost of replacing those assets (limited by how far underwater they were on the mortgage naturally).

Your other example involved blowing the borrowed money on entertainment in which case I agree that you come out ahead. But that is precisely why I used the term "assets" in GP.

Also I don't think everyone just gets let off scot free after a bankruptcy? Don't you sometimes get stuck with some amount of repayment depending on the nature and volume of your income?

My question about bank failure also still stands. While the impacts of this hypothetical on personal finances are certainly interesting to consider, I'm thinking we really don't want to do the whole widespread mortgage default thing again.

Sure, bank failure might happen. That comes out clearly in the chart; the flow of value is that the bank loses a bunch of cash which ends up in "hookers".

> But to an approximation declaring bankruptcy involves losing all of your remaining assets. So in that scenario the borrower is on the hook for the cost of replacing those assets (limited by how far underwater they were on the mortgage naturally).

If you financed something by borrowing against your house, then it cost less than your house, and when you have to replace it, the cost will be less than the cost of buying a house at the original prices. This is the "you lose your house and your car" example. Losing your mortgaged house and your owned-free-and-clear car is good when buying a replacement house+car costs less than the mortgage on your house.

What if house prices fall into the sweet spot where (1) your mortgage is underwater; and (2) a new house + new "assets" exceed the value of your mortgage? (But don't exceed the original value of your house.)

It could be that those assets don't generate income. In this case, they are isomorphic to the hookers in the example.

If they do generate income, then you might save money by keeping your house at its inflated pre-crash price, and you'll make those pre-crash loan payments using the income stream generated by the assets. Here you have a loan that is nominally against your house but actually against your business. It's underwater when considered as a mortgage, but it's not underwater when considered as a business loan, so you'll keep paying it. Your bank will be fine with this. (Both in the sense that they won't object, and also in the sense that they won't suffer financial hardship.) You'll probably have to recollateralize the loan.

(Or your assets might generate income, but not enough income that you'd save money by keeping your original mortgage. In this case it's straightforward that you're better off losing the original house, losing the original assets, buying a new house, and then not buying new assets.)

The bank isn't going to give you a loan for the next 300k house though, if you declared bankruptcy.

That is an excellent way of putting it. However I fear that it will be nigh impossible to convince the average Joe that the numbers going down was actually good for him.

> was actually good for him.

In the past tense it should be easy to do. Since he is better off, and he has a good view of how he's doing personally, you don't really need to do much. The difficulty is in convincing him that it will be good for him, not that it was good for him.

Compare congestion pricing in NYC, or self-service gas in Oregon.

In areas with low CoL the cost of building houses and the cost of selling a house has a massive impact on the number and type of homes that get built. If it's not profitable for a builder to build a home they simply won't, whether it's because of bureaucratic red tap or economic conditions. There's very strong incentives for builders to take the path of least resistance and highest margin.

> If it's not profitable for a builder to build a home they simply won't,

Agreed. They will generally build as tall and as dense as they are permitted to because (within reason) it reduces unit cost. Obviously there are limits to that. No one wants to build a high rise in the middle of nowhere.

But within high CoL areas they are generally severely limited on both of those aspects. That's due to zoning laws.

Of course that's not the whole story. Infrastructure has to be upgraded to keep pace with growth. But that's on the local government to plan and execute properly. Right now they largely just say "no".

The profit margin has to be significantly higher than simply plopping that cash straight into an index fund. The risk of a project failure is simply too high.

I imagine the margin necessary scales with the size of the project.

> If it's not profitable for a builder to build a home they simply won't, whether it's because of bureaucratic red tap or economic conditions.

Right, and that bureaucratic red tape is one of the things that makes the cost of building higher. If the builder expects they won't be able to break ground for two or three years because dealing with the planning commission takes forever, or because they'll have to deal with environmental lawsuits before they can build, then they will need to target higher-end buyers (by building a higher-end property) in order to make a profit. And if they can't do that... right, they simply won't.

The zoning laws are far from the only tool used by municipalities to dramatically reduce supply. Permitting, requiring expensive changes at various points in the process, local building boards requiring extraneous modifications and often forcing scope reductions, affordable housing requirements, etc all make building more expensive. Often by a very large amount.

These processes are intentionally labyrinthine

I don't believe this has much impact on the current situation (relative to zoning) but would be interested to learn otherwise. Can you provide verifiable examples for any of it?

Eh, reforms are starting to happen, like here in Oregon.

https://bendbulletin.com/2025/12/13/middle-housing-slowly-de...

Or this:

https://bendyimby.com/2025/06/12/detached-townhomes-come-to-...

And it continues:

https://www.sightline.org/2025/06/04/oregons-zoning-reforms-...

It generally does not drop values, just allows for cheaper options.

> It generally does not drop values, just allows for cheaper options.

That can only be true if you suppose that the current values aren't driven by supply and demand. How do you propose to explain that?

"drop" is doing a lot of work there; as these things are slow and take time, the "drop" is often a reduction in the rate of appreciation (which, everything else being the same, should roughly be equal inflation ± some fudge factor for desirability of the area).

that's a great paper, but did you read it? I don't see the authors reaching this conclusion. in fact, they seem pretty emphatic that restrictive zoning is a major driver of supply bottlenecks.

"We don't build enough houses" does not explain the massive spike in prices we have seen in the last 5 years.

I don't think that's quite what the comment is claiming. They're not saying that some small portion of homeowners are working together to raise prices. I think they're more talking about the concept of "marginal buyers." It's the marginal buyer that sets prices, not the average buyer. And particularly when supply is heavily restricted, the marginal buyers can be a very tiny portion of all buyers, and can look very different from the average buyer.

Marginal buyers have a big impact by adding a lot of liquidity, but I'm not sure they manipulate prices that much, given that if they ever tried to move prices far from the margin they would cease to be marginal buyers.

But again, I don't think we're talking about a concerted effort to manipulate prices. We're talking about the effect that particular marginal buyers just so happen to cause.

Define "tiny portion of the market", especially "market".

There are many houses in the US. Not all of them are for sale. There's a difference between having a "tiny portion of the market" when you define "the market" as all houses in the US, and "tiny portion of the market" when you define "the market" as the houses that are actively being bought and sold. I would not be surprised if corporate involvement was a significantly higher proportion of the latter rather than the former.

It takes a lot less to put your thumb on the scale of the "liquid" portion of a stock if it is significantly smaller in size than the total stock.

The market meaning all real estate, residential and commercial, and tiny, as in under 3%, with regards to what is owned by the institutional investors. That's probably higher with regards to properties that are or have been on the market in the last ten years or so. From what I can tell, the other ~97% is owned by individuals and smaller funds and mom&pop companies, with fewer than 20 properties involved.

In some dense urban areas, up to 10% of the local residential properties are owned by funds or investors. There's also overlap with investment networks where you're not getting to BlackRock levels, but you'll have a web of companies with mutual interests and a network of private debt and collateral, and these make up around 20% of the whole. For the most part, though, the majority of single family homes are not institutional. Even multi-family units, apartment complexes, and other rental properties are only in the ~10% range of institutional ownership, with the remainder owned by individuals, mom&pops, and small investment networks.

The conjunction of capabilities and incentives in combination with a huge buffer of wealth allows institutional investors to manipulate things in ways that aren't healthy for private home ownership, and the downstream social and economic impacts of being forced to rent, or hold debt that's not properly reflective of the value of the property.

We should impose reasonable policies that serve the interests of the people, and not simply maximize wealth building at the expense of citizens and families that would benefit from home ownership.

To add to this: the "total stock" is also completely different to any other asset in terms of market forces, because it varies widely depending on the buyer in question. People don't shop for "a house" and address the entire available market of houses in the country. They shop for a house in a particular area/city, of a certain value, with certain amenities, in proximity to other things, etc. etc. etc.

In this way houses are virtually unique in terms of financial vehicles and it introduces all manner of complexity and otherwise strange forces into the market. You can't simply treat it like any other commodified asset.

I generally agree with you on market discussions, but I don't think you're considering this one correctly. Imagine a country responsible for just 10% of global oil production decided to stop producing. What's going to happen oil prices assuming no other country starts producing more?

They're going to skyrocket in a seemingly irrational way. But it's completely rational. The reason is that they're a finite resource that is needed, and so there is very minimal price elasticity. People will pay as low as they can, but simultaneously must have oil and so have a practically uncapped price ceiling if that's all that's available. The same is true of housing.

You're right that people won't, generally speaking, buy a house for $100 when there's another one for sale for $80. But what you've done there is greatly increase the demand for that $80 house, which is now going to naturally send its price upwards.

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Finally there's the issue that figures on the percent of homes that are owned by investment groups are misleading, because they aren't just buying homes randomly. They're going to pick up lots of houses in precise areas, and so the impact on prohibiting this behavior will be dramatic in these areas.

> so there is very minimal price elasticity.

Having lived through the various oil crises, I can confidently assert that there's a great deal of demand elasticity.

For example, when the 70s oil crisis hit, people stopped driving to the store for a loaf of bread, but would shop weekly instead. For another, people buy more fuel efficient cars when gas prices are high. For a third, people switch to electric cars.

There are regular major disruptions in the flow of oil. Pump prices change on a daily basis, and that results in the amount of gas available == number of gallons customers pay for. No gluts and no shortages.

That's the problem, they don't care if people will buy or rent them. They literally just sit on them writing off any losses against other business units.

When enough institutional investors are all doing that same thing, the market suppply becomes restricted, especially in focused regional areas. It ends up indistinguishable from collusionary antitrust, though there's no actual communicated collusion so it's not technically illegal. In a normal situation like that, all it takes is a single participant to cave and drops prices to take advantage of the demand. But in this case the institutional investors can keep taking the losses indefinitely so no one ever feels the need or benefit to "break" first, and they can maintain it forever.

Going by the graph in the article, that's still ~13% of homes owned by investors with >5 properties. And that's total of what is currently held, it speaks nothing of liquidity. That number likely includes investors who have had that property for a long time, the current property buy-up likely means far greater than 13% of the market right now is going to those sorts of aggregators.

Dropping the price of a house by a few percentage points can be the make-or-break for some families. And small changes in availability can have large impacts on price.

If we banned (or severely penalized) all entities from owning more than 5 residential homes, this would probably reduce cost by a few percentage points across the board. That's thousands of dollars.

Personally, I think unoccupied homes in general ought to be penalized (beyond just tax burden, an actual vacancy tax).

You may be interested in learning about the Land Value Tax[0] which will in effect, taxes become more burdensome for leaving land unproductive (e.g., empty housing or land). It also shifts the calculus on home improvements, which means remodeling your home or doing other perhaps large pieces of upkeep will not trigger a property tax increase as it does today, which is better for median home owners as well.

[0]: https://en.wikipedia.org/wiki/Land_value_tax

    > home improvements, which means remodeling your home or doing other perhaps large pieces of upkeep will not trigger a property tax increase as it does today

I have heard this complaint here a few times, but very few specifics. I would call getting your roof replaced or your kitchen/bathroom remodelled as major home improvements. Do these actually property tax increases?

In general a roof repair (including a full replacement) won’t trigger a re-assessment but a kitchen remodel will.

A roof replacement isn’t really an improvement so much as expensive maintenance.

Imagine actually telling the government that you remodeled your kitchen. Nobody is that dumb, right?

Some people think the primary purpose of building permits and inspections is to ensure quality work. Others disagree.

Depends on how your locality assesses the value of your home. You can probably do a web search for where you live specifically if you want to get into the nitty gritty. In the places I've lived, unless I added more square footage, these won't trigger an automatic property tax increase.

But if the improvements on your house makes the neighborhood more desirable and your neighbor's house sell for a higher price then your locality expects, then your house will be assessed at a higher value the next time the locality does their assessments, which means higher taxes.

Of course, improvements to your home that increase a sale value will affect the taxes, but the buyer has to deal with that.

Do some localities assess homes individually every so often? I wonder...

In many jurisdictions they do, yes. A general guideline is that if it requires an permit it will typically trigger an assessment and thus increase in property tax

If everything else is equal, a roof replacement or other maintenance shouldn't appreciably change the value of the house (not beyond the cost of maintenance).

What WILL change your property tax is an addition or similar that makes your house go from X (same as everyone around you) to 1.2X or similar, then you'll proportionally pay more tax.

(It varies by district, but most USA property taxes are calculated by figuring out the budget for the city/county/school district, and dividing it proportionally amongst the valuations of properties/houses. This is often displayed as a percentage of the value, but it is not a percentage TAX - as if everyone's property doubles overnight but the budget remains the same, the property tax dollar amounts would remain the same while the percentage reported goes down.)

>Personally, I think unoccupied homes in general ought to be penalized

As is done in the UK

That sounds like the "empty home premium" - which only kicks in after a year:

https://www.gov.uk/council-tax/second-homes-and-empty-proper...

Which is fair compromise as it can take that long to find a tenant.

I think Vancouver has a vacancy tax. Does it work?

The thing is that there is only a tiny portion of houses ever selling at any time. The only ones that would benefit from selling are people who are downsizing or moving away.

If you buy 60% of the properties on market, the rest will see this and adjust their own prices. Usually this only works when the macro is favourable (low interest rates, easy mortgage applications, etc.), but it is definitely a large factor. It sometimes creates a even hotter market, with people thinking that real estate goes up forever, then they sell.

You're right that it's not always large investment groups. Vancouver in Canada had the same thing happen, but mostly from foreign investors and criminals washing money. The latter was facilitated by politicians who cashed in big on this.

I don’t understand the last sentence in your second paragraph. If “people [think] that real estate goes up forever” why does that trigger them to sell?

But if you bought that tiny portion of the total market all at once or in concentrated areas you better believe you can influence it.

https://papersourceonline.com/wall-street-has-spent-billions...

https://www.kut.org/texasstandard/2022-06-14/texas-home-sale...

> People won't buy them when there's another house for less.

As others have pointed out housing markets are illiquid and tend to have a limited set of sellers at any given time such that the race-to-the-bottom doesn’t happen very often.

Rather, an institutional investor buys high on houses in desired neighborhoods then charge high rents on their portfolio. Subsequent sellers in the same neighborhood see the high closing price and ask for even more.

You don't have to control the whole market to manipulate it. Housing is localized and the ideal situation is people hold onto their homes for decades before going on the market again and spend months if not years looking at purchasing a home. But investments into single family homes operates on completely different timescales and pace with an entirely separate list of considerations and values.

When a strongly capitalized minority cohort can sustain positions that are untenable for normal market participants, they can act as a kingmaker by shaping outcomes at the margin.

There won't BE another house for less, because of the way the real estate market works. If a house goes up in price, others do to.

There is always another house for less. You will almost certainly have to sacrifice on something (size, location, condition) in order to find that lower price but you can get there if price isn’t flexible.

Does no one remember “drive til you qualify”?

The theater on fire has a small exit door.

It can in an extremely illiquid market.

    > because their properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives that you don't normally want operating in the arena of housing.

I assume that you are already aware that regular home buyers use debt, and, thus lots(!) of leverage to buy their homes. The average down payment for first time buyers in the US is about 10%. That is a lot of leverage! Probably much more than corporate buyers of residential homes.

    > instrumentalized

What does this term mean? I have never seen it before. My spell checker does recognize it as a word.

    > securitized

Regular home buyers almost always enter into borrowing agreements with their bank that fit loan buying programmes with Fannie Mae and Freddie Mac. This allows for most of these loans to be securitized into MBS.

    > with derivative products

Can you give an example scenario / product? Else, this feels like handwaving. CDS on MBS is an absolutely tiny market these days.

    > speculation

There is already plenty of speculation from regular home buyers in the US. Do you have any suggestions to reduce the existing speculation by these regular buyers?

The vast majority of land in the country has been owned by capitalistic profit motivated players since 1776 - individual home owner occupiers.

If you doubt they will lobby to increase their profit, try proposing anything that has a 0.1% risk of their property value going down and see how they react.

An article making that case: https://www.thebignewsletter.com/p/messing-with-texas-how-bi...

A rebuttal to that article from Derek Thompson: https://www.derekthompson.org/p/the-anti-abundance-critique-...

Noah Smith on "Corporations aren't the reason your rent is too high", with nice things to say about Thompson:

https://www.noahpinion.blog/p/corporations-arent-the-reason-...

Quoting Thompson:

"The U.S. has roughly 140 million housing units, a broad category that includes mansions, tiny townhouses, and apartments of all sizes. Of those 140 million units, about 80 million are stand-alone single-family homes. Of those 80 million, about 15 million are rental properties. Of those 15 million single-family rentals, institutional investors own about 300,000; most of the rest are owned by individual landlords. Of that 300,000, the real-estate rental company Invitation Homes—in which BlackRock is an investor—owns about 80,000. (To clear up a common confusion: The investment firm Blackstone, not BlackRock, established Invitation Homes. Don’t yell at me; I didn’t name them.)

Megacorps such as BlackRock, then, are not removing a large share of the market from individual ownership. Rental-home companies own less than half of one percent of all housing, even in states such as Texas, where they were actively buying up foreclosed properties after the Great Recession. Their recent buying has been small compared with the overall market."

“properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives”

Spoken like someone has no clue what they are talking about and just throwing out jargon

I think specifically spoken like someone who saw The Big Short very recently

The truth is that BlackRock buying rental properties is the opposite of that. The foundation of the MBS market is in its name: mortgages.

I somehow doubt these institutions are market makers in the housing market, if they had been ones then they'd be offering to sell and buy houses all the time, this is a market maker's function.

Not buying this. Have you seen studies that support this line of arguments?

Why doesn't your explanation apply to every commodity? Gold, cocoa, mustard seed, electricity? These are also essential products subject to the influence of markets and market makers.

You can substitute cocoa sources globally, but you can't substitute a house in Charlotte with one in Phoenix.

If cocoa prices spike, you buy less chocolate. If housing prices spike in your job market, your options are: pay more, endure a brutal commute, or uproot your life. The demand is far more inelastic.

> Gold, cocoa, mustard seed, electricity

I can easily live a full and meaningful life without owning gold, drinking cocoa or eating mustard. Those aren't essential and have decent substitutes.

Electricity is essential, just like housing and it's very highly regulated.

That's overly reductive. I was hoping that the specific commodities weren't going to be the focus, but I guess that was naive.

If you're going to use "housing" as an umbrella for its substitutes, let me do the same. Instead of wheat, beef, pork, cocoa, sugar, etc, let's call that "food". So now food is as essential as housing. Why doesn't the housing complaint against speculators work for food speculators?

The argument is either intellectually dishonest or you just really haven't thought this through very deep and are just puppeting this neoliberal bullshit.

We could start with I have traded wheat futures and could hedge with future contracts on all those commodities. You can't trade single family home derivatives in the same way because it is not the same.

This is unthinking market religion stupidity and the result is going to be a massive over correction towards socialism. You don't help free markets with this bullshit. You are helping to destroy them in the long run.

So on one side, we have a theory which suggests increasing supply to reduce prices. And on the other, we have playing whack-a-mole with the bogeymen du jour who are manipulating a vast market. One solution makes economic sense and the other appeals to populists who favor state control.

And you're claiming that the reaction to opposing state control and socialism is socialism? Not compelling.

Just curious, where do you live that electricity is sold in an open market? Seems like a very strange setup.

Much of the US works this way, but individual consumers don't buy it that way. It's the level above that.

In other words it doesn’t work that way. The people who actually pay for the end product do not have the opportunity to apply market pressure by choosing a different source.

Yes, they do apply market pressure. They can change who they buy from and there are different deals - like fixed rate, or different charges for different time periods.

The intermediate players "electricity retailers" then participate in a day ahead and real time market to fulfill their obligations to their customers. This is a good summary (https://chatgpt.com/share/696170d5-5d08-8002-a0ff-e2f45e42c4...) - if you hate ai links, so be it, this is a good description of an esoteric topic.

You'll find most markets actually work this way. When I go to the supermarket to buy sugar, the price isn't jumping around real time with the underlying price of sugar. Same for coffee etc. But it changes with a lag, and consumers respond and the effects flow through even if not in real time. Similar things occur in most markets where there is a wholesale market for something and then several players between that market and the consumer, each player doing some combination of logistics, risk eating, aggregation/disaggregation etc.

So you weren't really "just curious". You felt it necessary to cherry pick a particular commodity to debunk the notion that markets are markets? Do harder to steel man it.

A “market maker” provides liquidity that allows trades to clear and keeps prices stable. They make money on the bid-ask spread. They don’t have leverage to raise or lower prices.

Another thing: Residential homes are never considered liquid assets. They don't need professional market makers.

Liquidity doesn’t make something more or less of an investment, it makes it easier to buy and sell. Liquidity in residential homes is a good thing. It means that it’s easier to sell your house and buy a new one if you need to move for whatever reason.

If we're still talking about big investors, they're buying, not selling. They're not "market makers" if they're one side only.

If what you say is true, wouldn't the same argument apply to practically every market these institutions are in? Oil, timber, steel, AI stuff, cars, you name it.

If you have a model where you can do price manipulation of something while owning 1% of it, I understand why you wouldn’t share it. Where are you on the Forbes Billionaire List, out of curiosity?

The majority of the US population (65% https://fred.stlouisfed.org/series/RHORUSQ156N) are home owners. I agree that high home prices are not in the interest of the majority of the population, but I bet the majority think so.

> you allow for policy that doesn't maximize the cost of real estate over the interests of the majority of the population.

How do you think homeowners would feel about a policy that doesn't maximize the value of their homes. That's just another way to phrase "maximizing the cost of real estate"?

What I don't understand is how this new type of asset is above reproach.

I mean BlackRock and Blackstone creating securities backed by real estate in general, not only single family homes.

What if this new type of asset signals to the broader real estate market that regulators favor large investors?

Even more likely, what if this new type of asset succeeds at the expense of first time home buyers?

Controversial, but for affordability reasons, there even should be a cap on how many homes an individual can own for rentals. For the sanity in the housing market, members of society need to be driven to participate in other business activities for income/revenue, not rentals.

This is basically a maximum wage for landlords, bound to start a secret society.

IMO it's a crooked notion that landlords are rent seeking and nothing else - they do create supply and maintain housing.

Issue is when they want to politically and artificially raise the value of their property by preventing more housing from being built, so, if you're going to ban something, ban artificial regulations on construction!

North Carolina has done some good by loosening up code around tiny homes, but, a lot of municipalities want to enforce big homes only because they like the property tax of high value houses, 4 bedroom and all. Small town I'm in basically won't allow expansion of housing because the people that live here don't want the village to get any bigger, but if it's democratic like that I'm mostly OK with it, it's when there's demand for housing and someone with a perverse incentive to block it that we should want to solve for.

No, the real problem is that the vast majority of their income does not come from their role in creating supply or maintaining housing.

Proof: Propose a 100% land value tax, which definitionally only removes that part of income that is generated by the community around their property, and see if they go for it.

The actual value of a landlord is insulating the tenant from financial risk, charging a predictable rent and absorbing the costs of repairs and maintenance. That's a lot of value for some people, but it also comes with problematic incentives and obvious bad outcomes when combined with other aspects of housing markets.

In a perfect world, but rent is often less significantly predictable than mortgage payments. Of course the cost of repairs and maintenance isn’t absorbed, it is paid in full by the renter in the cost of rent.

Over the term of the lease agreement, rent is contractually predictable.

Which is rarely longer than a year, and many people go month-to-month, if they even have a contract.

> IMO it's a crooked notion that landlords are rent seeking and nothing else - they do create supply and maintain housing.

They don’t create supply in any way, the only ones who do that are builders. But sure they maintain houses. Although just the bare minimum, they will never fix it nicely - just enough to rent it out.

> They don’t create supply in any way, the only ones who do that are builders.

For a house to be available for me to rent, both things need to happen.

Someone had to build it, obviously. But just as necessary, someone needs to offer it up for a rental.

One of these things precedes the other in time, however, which may be significant.

But not in the causal chain. The building happened because someone was willing to pay for a fungible asset. An asset is only fungible if there are buyers.

> The building happened because someone was willing to pay for a fungible asset.

Building often happens because a developer believes someone will buy the homes they build. A lot of the time, they are right; some of the time they are wrong. Some developers will get buyers lined up first, to minimize the risks of being wrong; many do not. In the latter case, there's no inherent connection between the building and subsequent buyers.

> But sure they maintain houses. Although just the bare minimum, they will never fix it nicely - just enough to rent it out.

Depends a lot on the landlord. Many will fix it up nicely because they can charge a higher rent. Much of my work is repairing rental properties and I've seen all types of landlords. I try not to work for the cheap ones if I can help it because I don't want my name associated with the crap they want me to do.

How does one propose to supply the market for temporary housing without landlords? Students, travelers, new residents to an area, people early in their careers switching jobs frequently, all of these people have a need for temporary housing. If the only people who own buildings live in them, where do these people find their housing?

I spent over a decade living in various rentals after I moved to a new state. I didn't have the money to buy when I first moved, and even if I had, I didn't know the area well enough to know whether I would want to buy where I first lived. And having the ability to just pick up and move meant I had a lot of flexibility for chasing job opportunities. Don't get me wrong, there's plenty to love about the home I own now, but it absolutely ties me down and anchors me in ways that renting never did. I for one am glad to have had people willing to rent property to me.

All fair and valid points. I agree. In today’s age with a career in the tech field and a newly first time home owner, I do feel the aspect of being tied down. But I never really got to avail of moving to chase job opportunities since the Bay Area is where they’re the densest. That being said during Covid times I had to move to the PNW due to layoffs (got a great offer, but I didn’t have to accept it and could afford to keep looking). So I really do understand the benefits of renting.

Like I said in another reply, I don’t consider landlords to be inherently bad. But there are a lot who will try to take advantage of you if you let them. You have to be lucky to get a good one - I only had a couple out of the dozen or so and I wish them the best.

Of course landlords create supply.

A renter is someone looking to rent. If someone buys a home then rents it out they just +1 the supply of rental units.

Only if that home wasn't already rented out by the previous owner.

A high proportion of real estate sales are owner churn, not the purchase of brand new never used before properties.

The actual value of landlording is offloading financial risk. The tenant pays a stable rent including a premium in exchange for maintenance, repairs, and not having to sell a home in order to move to a new one.

I just can't bring myself to agree with the hard-line socialists who think landlording is fundamentally a bad thing. There are a lot of problems with it, but it does have a legitimate place in the world.

I don’t think it’s fundamentally a bad thing. It has its place. But it’s an industry that’s easily exploited - I rented over a dozen places and like 80% would try to do things that the tenant handbook would not allow. I sued one of them, and settled out of court for another. And surprise surprise a lot of them don’t want to rent in areas that are pro-tenant rights.

Right, it's entirely possible that landlording in practice has so many opportunities for abuse that it's irredeemable despite its potential for benefit in certain cases. I don't know if I agree with that, but at least it's more intelligent than "Marx says landlords bad therefore landlords bad."

"Rent seeking" has nothing to do with landlords and tenants. It's about buying legislation that forces people to give you money for nothing.

https://en.wikipedia.org/wiki/Rent-seeking

Tenants who rent property get something tangible in exchange for their cash - exclusive use of the property.

Just because the word "rent" is common to both, doesn't mean they are connected in any way.

gp used "rent seeking" correctly.

The concept of "landlords do nothing while collecting passive income, therefore not creating any value but instead are just exploiting that they own the land" would be correctly described as "rent-seeking behavior".